If You Can’t Beat ‘Em, Join ‘Em: Penn National Drops Suit To Focus On Satellite Casinos

By Grant LucasJuly 25, 2018

The lawsuit filed by Penn National against Gov. Tom Wolf and the Pennsylvania Gaming Control Board (PGCB) is no more.

The suit focused on the new Category 4 casino licenses for mini-casinos in Pennsylvania. With two of its own mini-casinos of its own to worry about, however, Penn National pulled the lawsuit. Instead, it is plugging forward on its two satellite properties.

More on the Penn National lawsuit

For months, Penn National fought against the new Category 4 provisions. The company feared cannibalization of existing businesses.

The Cat 4 licenses authorized a 25-mile buffer zone. Penn National used its Hollywood Casino as its prime example. The suit claimed the casino enjoyed a wide geographic reach for potential customers and the buffer zone would affect Hollywood’s business.

Penn National’s case implored the federal courts to block the new Cat 4 provisions because they use “unconstitutional” language. The company alleged that mini-casinos pit Penn National in a worse position than any other casino in the Keystone State.

And to top it all off, Penn National claimed that Mount Airy Casino received special treatment by the PGCB prohibiting new casinos within three counties surrounding Mount Airy.

There’s more to the dropped suit

Despite its initial — and then ongoing — objections to the new licenses, Penn National still jumped on board.

The company dropped $50.1 million for the state’s first Cat 4 license, then purchased a second license for another $7.5 million. So while Penn National fought against mini-casinos, it held ownership of two mini-casinos: one near York, the other between Lancaster and Reading.

In an interview with PennLive, spokesman Eric Schippers said Penn National “made a business decision to withdraw our lawsuits against the Category 4 (casino) law.”

“While we continue to believe in the merits of our arguments, we have chosen to focus entirely on our development efforts for our two new casinos, rather than pursue what is likely to be a lengthy and costly legal battle.

“As previously stated, our goal in pursuing our Cat4 licenses is both defensive, in terms of protecting our existing investment at Hollywood Casino from new competition, and offensive in terms of penetrating more deeply into more populous market areas to our south and east, in order to drive incremental value for our shareholders.”

Boiled down, Schippers said the suit was dropped so that Penn National can move forward with its mini-casinos, even if they were initially purchased as a “defensive” move.

Regulation stipulations could explain Penn’s decision

That said, it appears Penn National were forced to choose between lawsuit or mini-casino. From the PGCB rules:

Notwithstanding any law to the contrary, the board and the commissions shall not consider any application for a license if the applicant or any person affiliated with or directly related to the applicant is a party in any ongoing civil proceeding in which the party is seeking to overturn or otherwise challenge a decision or order of the board or commissions pertaining to the approval, denial or conditioning of a license to conduct thoroughbred or harness horse race meetings respectively with pari-mutuel wagering or to operate slot machines.

PA not out of the woods yet

Yes, Penn National has withdrawn its suit. But Sands Bethlehem continues to press on.

The casino also filed a lawsuit late last year, alleging that the new gambling law is in violation of state and federal constitutional law by requiring high-revenue casinos to pay a special tax. That tax is moved into a marketing fund that benefits smaller casinos.

Sands Bethlehem does not seem to be as willing to pull its suit as Penn National.